Unless you’ve been living under a rock, you know BlackBerry (NYSE:BB) is no longer as popular as it once was. The company, then Research In Motion, and its now-eponymous device, essentially defined the smartphone product category after the Canadian technology company shrewdly added email functionality to a mobile phone. At one point, its devices were deemed so addictive that fans jokingly renamed the device a “CrackBerry.”
Unfortunately for investors, and at the expense of perhaps overstretching the aforementioned “CrackBerry” analogy, the habit has been rather easy for most former addicts to kick. After rising as high as $150 on a per-share basis, the company now sits near $7 per share, as the company’s smartphones have fallen out of favor, and demand cratered. While BlackBerry was intensely focused on physical keyboards, competitors like the iPhone and Google (NASDAQ:GOOG) (NASDAQ:GOOGL) Androids were more focused on improving their ecosystems and experiences, treating the phone as a mobile gateway to the Internet.
By the time BlackBerry realized consumers favored Apple's and Google’s approaches, it was essentially too late. Developing an ecosystem is somewhat like a “chicken versus egg” problem: On one hand, a top-notch ecosystem is dependent on third-party developers, who will not make apps and games for your devices unless you have significant users. However, you will not acquire significant users until you have that top-notch ecosystem.
BlackBerry’s newest move, however, has the potential to negate its ecosystem deficiency.
The rumors appear to be true
Earlier this year, heads turned when the rumor mill started buzzing about a potential Samsung (NASDAQOTH: SSNLF) BlackBerry unit. The rumors made sense, as they pointed toward a partnership that stressed specialization of what each participant did well -- BlackBerry’s secure services, specifically BlackBerry Messenger, on a unit manufactured by Samsung. But perhaps the biggest disclosure was the fact that BlackBerry would use Google’s Android operating system instead of its fledgling BlackBerry 10 system.
According to in-the-know technology journalist Evan Blass, BlackBerry’s next handset -- the BlackBerry Venice -- will be an Android-powered unit, although Samsung’s involvement was unknown at the time of this writing.
However, an additional leak from Blass appears to show BlackBerry’s current flagship, the Passport, running Android, as well. If so, this could signify more than just a partnership between Google and BlackBerry, and more of a whole-scale migration to Google’s Android OS.
If BlackBerry’s handset business is worthless, this makes sense
As far as BlackBerry’s concerned, the hardware business has been valued as “worthless” from analysts; scaling back investment in its ecosystem, and replacing it with the most-popular one, is a win-win for all parties. Consumers will have a better experience, BlackBerry saves research and development money, and Google brings more participants to its host of mobile services.
For BlackBerry, this appears to be in line with Chen’s turnaround vision, widely considered a software guy from his turnaround job at Sybase. After years of BlackBerry’s revenue mix being dominated by hardware (read: smartphones), last fiscal year, the company’s service and software eclipsed hardware for the bulk of sales.
In BlackBerry’s recently-reported first fiscal quarter, its software and technology licensing revenue increased 150% over last year’s total due to technology licensing (not smartphone software). Right now, it makes more sense to concentrate on technology licensing, and probably should fully transition to Android on all its phones.